Refining Constraints Keep Gas Prices Elevated Despite Crude Price Drop
Gas prices may remain high even after the summer driving season ends due to a tight fuel market caused by the wars in Europe and the Middle East. A shortfall of refining capacity has resulted from these conflicts, with U.S. drivers currently paying around $4.06 per gallon, down from the 2026 high of $4.56 but still 36% above what gas cost on Feb. 27 before the U.S. and Israel attacked Iran.
Patrick De Haan, head of petroleum analysis at GasBuddy, believes that prices could hit a Labor Day record if Washington and Tehran do not reach a stable agreement on the Strait of Hormuz, which set a high of $3.83 per gallon in 2012. Even with crude oil prices dropping significantly from this year's highs, fuel remains expensive due to refining constraints.
ExxonMobil CEO Darren Woods told CNBC that 'there is a disconnect between crude prices and pump prices' caused by the demand for refining rather than crude oil. Refiners are benefiting from big margins between the input cost of crude oil and the sales price of products like gasoline and diesel, known as the crack spread.
The tightness in refining explains why fuel remains expensive even as U.S. oil prices have plunged about 10% this week to trade around $76 per barrel. The global shortage in refining capacity is resulting in gas that is unusually expensive for this time of year.